EXECUTION COPY
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SECURITIES PURCHASE AND INVESTOR RIGHTS AGREEMENT
BETWEEN
INTEL CORPORATION
AND
PANJA INC.
DATED DECEMBER 15, 1999
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PANJA INC.
SECURITIES PURCHASE AND INVESTOR RIGHTS AGREEMENT
This Securities Purchase and Investor Rights Agreement (this
"AGREEMENT") is made and entered into as of December 15, 1999, by and between
PANJA INC., a Texas corporation (the "COMPANY"), and INTEL CORPORATION, a
Delaware corporation (the "INVESTOR").
RECITALS
WHEREAS, the Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, shares of Common Stock, par value $.01 per
share, of the Company (the "COMMON STOCK"), a warrant to purchase a number of
shares of Common Stock substantially in the form attached to this Agreement as
EXHIBIT A (the "Equity WARRANT"), and a warrant to purchase a number of shares
of Common Stock substantially in the form attached to this Agreement as EXHIBIT
B (the "Business WARRANT," together with the Equity Warrant, the "Warrants"), on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO PURCHASE AND SELL SECURITIES.
(a) AUTHORIZATION. The Company's Board of Directors will,
prior to the Closing, authorize the issuance, pursuant to the terms and
conditions of this Agreement, of the number of shares of Common Stock being
purchased hereunder and the Warrants, and shall further reserve for issuance
upon exercise of the Warrants the number of shares of Common Stock issuable upon
exercise of the Warrants (the "WARRANT SHARES").
(b) AGREEMENT TO PURCHASE AND SELL CERTAIN SECURITIES.
(i) The Company hereby agrees to issue to the
Investor at the Closing (as defined below), and the Investor hereby agrees to
acquire from the Company at the Closing, (A) four hundred twenty-three thousand
two hundred twelve (423,212) shares of Common Stock (the "PURCHASED SHARES")
and (B) the Equity Warrant, for an aggregate purchase price of Five Million
Dollars ($5,000,000) (the "PURCHASE PRICE").
(ii) The parties hereto acknowledge that the
Equity Warrant is being issued by the Company to the Investor solely in
consideration of, and with respect to, the purchase by the Investor of the
Purchased Shares and not in consideration of the execution and delivery by the
parties of the Cooperation Agreement, dated as of the date hereof, between the
Company and Intel (the "BUSINESS AGREEMENT"); and no action that occurs under
the Business Agreement will have any effect on the validity or exercisability
of the Equity Warrant.
(c) AGREEMENT TO PURCHASE AND SELL BUSINESS WARRANT. The
Company hereby agrees, in connection with the Business Agreement, to issue to
the Investor at the Closing, and
the Investor hereby agrees, in connection with the Business Agreement, to
acquire from the Company at the Closing the Business Warrant.
(d) EXERCISE PRICE OF THE WARRANTS. The exercise price
of the Warrants shall be $21.54 per share as reflected in the Warrants.
(e) USE OF PROCEEDS. The Company intends to apply the net
proceeds from the sale of the Purchased Shares for working capital and other
general corporate purposes and to fund the Business Agreement between the
Company and Investor.
2. CLOSING. The purchase and sale of the Purchased Shares and the
Warrants shall take place at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 0000
Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx, at 10:00 a.m. California time, within
three (3) business days after the conditions set forth in Sections 5 and 6 have
been satisfied (or waived by the party entitled to waive any such conditions),
or at such other time and place as the Company and the Investor mutually agree
upon (which time and place are referred to in this Agreement as the "CLOSING").
At the Closing, the Company will deliver to the Investor certificates
representing the Purchased Shares and the Warrants against delivery to the
Company by the Investor of the Purchase Price in cash paid by wire transfer of
funds to the Company. Closing documents may be delivered by facsimile with
original signature pages sent by overnight courier. The date of the Closing is
referred to herein as the Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that the statements in this Section 3
are true and correct, except as set forth in the Disclosure Letter or in the SEC
Documents (as defined below). The Disclosure Letter (the "DISCLOSURE LETTER")
shall set forth exceptions, if any, to the representations and warranties made
by the Company in Section 3 hereof. Such Disclosure Letter shall be organized
such that any exceptions specifically identify the representation and warranty,
by section, to which they relate, and shall clearly identify the nature of the
exception, to the Investor's reasonable satisfaction.
(a) ORGANIZATION GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas and has all corporate power and authority required to
(a) carry on its business as presently conducted, and (b) enter into this
Agreement, the Warrants and the other agreements, instruments and documents
contemplated hereby, and to consummate the transactions contemplated hereby and
thereby. The Company is qualified to do business and is in good standing in each
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT" means a material
adverse effect on, or a material adverse change in, or a group of such effects
on or changes in, the business, operations, financial condition, results of
operations, prospects, assets or liabilities of the Company and its
Subsidiaries, taken as a whole.
(b) CAPITALIZATION. The capitalization of the Company, without
giving effect to the transactions contemplated by this Agreement, is as follows.
The authorized stock of the Company consists only of 40,000,000 shares of Common
Stock, of which 8,561,612 shares were issued and outstanding as of October 31,
1999, and 10,000,000 shares of preferred stock, none of
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which is issued or outstanding on the date hereof. All such shares of Common
Stock have been duly authorized, and all such issued and outstanding shares
of Common Stock have been validly issued, are fully paid and nonassessable
and are free and clear of all liens, claims and encumbrances, other than any
liens, claims or encumbrances created by or imposed upon the holders thereof.
As of the date hereof, the Company also has reserved 5,149,155 shares of
Common Stock for issuance upon exercise of options, rights, or other stock
awards granted to officers, directors, employees, consultants or independent
contractors or Affiliates of the Company under the Company's employee
benefit, stock purchase, stock option and equity incentive plans. As of
October 31, 1999, of the shares of Common Stock reserved for issuance upon
exercise of options, 2,080,710 shares remained subject to outstanding options
and 2,701,662 shares were reserved for future grants. As of October 31, 1999,
70,990 shares of Common Stock have been sold under the Company's stock
purchase plan, and 179,010 shares remain available for sale under such plan.
All shares of Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they
are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. There are no other equity securities, options, warrants,
calls, rights, commitments or agreements of any character to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend or enter into any such equity
security, option, warrant, call, right, commitment or agreement.
(c) DUE AUTHORIZATION. All corporate actions on the part of
the Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
the Company under this Agreement and the Warrants, and the authorization,
issuance, reservation for issuance and delivery of all of the Purchased Shares
being sold under this Agreement and the Warrants Shares issuable upon exercise
of the Warrants, have been or will be taken prior to the Closing, and each of
this Agreement and the Warrants constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except (a) as may be limited by (i) applicable bankruptcy,
insolvency, reorganization or others laws of general application relating to or
affecting the enforcement of creditors' rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies and (b) as rights
to indemnity or contribution may be limited under federal or state securities
laws or by principles of public policy thereunder.
(d) VALID ISSUANCE OF STOCK.
(i) VALID ISSUANCE. The Purchased Shares and
the Warrant Shares will be, upon payment therefor by the Investor in accordance
with this Agreement and the Warrants, respectively, duly authorized, validly
issued, fully paid and non-assessable (provided that the Investor acknowledges
that the certificate representing the Purchased Shares will not be physically
delivered to the Investor until the expiration of the Nasdaq imposed waiting
period relating to listing applications, which shall not in any event be more
than 14 business days after the Closing Date).
(ii) COMPLIANCE WITH SECURITIES LAWS. Assuming
the correctness of the representations made by the Investor in Section 4 hereof,
the Purchased Shares and the
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Warrants will be issued to the Investor in compliance with applicable
exemptions from (i) the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "SECURITIES ACT") and (ii) the
registration and qualification requirements of all applicable securities laws
of the states of the United States.
(e) SUBSIDIARIES AND AFFILIATES.
(i) The Disclosure Letter or the SEC Documents
sets forth a list of all entities in which the Company beneficially owns,
directly or indirectly, 50% or more of the outstanding stock or other equity
interests (collectively, the "SUBSIDIARIES"). The Disclosure Letter also
includes a complete list of the corporations, partnerships, limited liability
companies or other entities with respect to which the Company beneficially owns,
directly or indirectly, ten percent (10%) or more of the outstanding stock or
other equity interests and the percentage ownership of such entity by the
Company. Except as set forth in the Disclosure Letter or the SEC Documents,
there is no other entity with respect to which: (i) the Company beneficially
owns, directly or indirectly, ten percent (10%) or more of the outstanding stock
or other ownership interests of such entity; (ii) the Company may be deemed to
be in control because of factors or relationships other than the quantity of
stock or other interests owned; or (iii) the investment by the Company is
accounted for by the equity method.
(ii) All capital stock or other equity interests
owned by the Company as described pursuant to Section 3(e)(i) are owned by the
Company or its Subsidiaries, as the case may be, as record and beneficial owner
thereof free and clear of all liens, charges, encumbrances, equities and claims
whatsoever. There is no outstanding or authorized option, subscription, warrant,
call, right, commitment or other agreement of any character obligating the
Company to issue, sell, transfer, pledge or otherwise encumber any share of
capital stock or other equity interest described pursuant to Section 3(e)(i) or
any security or other instrument convertible into or exercisable for or
evidencing the right to subscribe for any such share of capital stock or other
equity interest.
(iii) Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization. Each Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the nature of
the business conducted by it or the character or location of the properties
owned or leased by it makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect. Each
Subsidiary has all requisite corporate power and authority to own or lease and
operate its properties and assets and to carry on its business as now conducted.
(f) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration qualification, designation, declaration or
filing with, or notice to, any federal, state or local governmental authority on
the part of the Company is required in connection with the issuance of the
Purchased Shares, the Warrants or the Warrant Shares to the Investor, or the
consummation of the other transactions contemplated by this Agreement and the
Warrants, except for: (i) compliance with the HSR Requirements (as defined
below) that may be required for the issuance of the Warrant Shares; and (ii) the
listing of the Purchased Shares and the Warrant Shares on the Nasdaq National
Market. All such qualifications and filings will, in the
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case of qualifications, be effective on the Closing and will, in the case of
filings, be made within the time prescribed by law. As used herein, the term
"HSR REQUIREMENTS" means compliance with the filing and other requirements of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR ACT").
(g) NON-CONTRAVENTION. The execution, delivery and performance
of this Agreement and the Warrants by the Company, and the consummation by the
Company of the transactions contemplated hereby and thereby (including issuance
of the Purchased Shares, the Warrants and the Warrant Shares), do not and will
not (i) contravene or conflict with the Certificate of Incorporation or Bylaws
of the Company; (ii) constitute a violation of any provision of any federal,
state, local or foreign law binding upon or applicable to the Company; or (iii)
constitute a default or require any consent under, give rise to any right of
termination, cancellation or acceleration of, or to a loss of any benefit to
which the Company is entitled under, or result in the creation or imposition of
any lien, claim or encumbrance on any assets of the Company under, any contract
to which the Company is a party or any permit, license or similar right relating
to the Company or by which the Company may be bound or affected.
(h) LITIGATION. Except as set forth in the Disclosure Letter,
there is no action, suit, proceeding, claim, arbitration or investigation
("ACTION") pending or, to the best of the Company's knowledge, threatened: (i)
against the Company or its Subsidiaries, their respective activities, properties
or assets, or any officer, director or employee of the Company in connection
with such officer's, director's or employee's relationship with, or actions
taken on behalf of, the Company or a Subsidiary that the Company believes is
reasonably likely to have a Material Adverse Effect, or (ii) that seeks to
prevent, enjoin, alter or delay the transactions contemplated by this Agreement
or the Warrants. Neither the Company nor any of its Subsidiaries is a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. No Action by the Company
is currently pending nor does the Company intend to initiate any Action that is
reasonably likely to have a Material Adverse Effect.
(i) COMPLIANCE WITH LAW AND CHARTER DOCUMENTS. The Company is
not in violation or default of any provisions of its Certificate of
Incorporation or Bylaws, both as amended. The Company has complied in all
material respects and is in material compliance with all applicable statutes,
laws, rules, regulations and orders of the United States of America and all
states thereof, foreign countries and other governmental bodies and agencies
having jurisdiction over the Company's business or properties, where the failure
to so materially comply would reasonably likely have a Material Adverse Effect.
(j) SEC DOCUMENTS.
(i) REPORTS. The Company has furnished to the
Investor prior to the date hereof a complete and correct list of all
registration statements, reports and proxy statements filed by the Company with
the Securities and Exchange Commission (the "SEC") on or after March 31, 1999
(the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1999, its Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30
and September 30, 1999 and all such other registration statements, reports and
proxy statements are collectively referred to herein as the "SEC DOCUMENTS").
Each of the SEC Documents, as of the
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respective date thereof (or if amended or superseded by a filing prior to the
Closing Date, then on the date of such filing), did not, and each of the
registration statements, reports and proxy statements filed by the Company
with the SEC after the date hereof and prior to the Closing will not, as of
the date thereof (or if amended or superseded by a filing after the date of
this Agreement, then on the date of such filing), contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Company is not a party to any
material contract, agreement or other arrangement that was required to have
been filed as an exhibit to the SEC Documents that was not so filed.
(ii) FINANCIAL STATEMENTS. The Company has
provided the Investor with copies of its audited financial statements (the
"AUDITED FINANCIAL STATEMENTS") for the fiscal year ended March 31, 1999, and
its unaudited financial statements for the six-month period ended September 30,
1999 (the "BALANCE SHEET Date"). Since the Balance Sheet Date, the Company has
duly filed with the SEC all registration statements, reports and proxy
statements required to be filed by it under the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), and the Securities Act. The audited and
unaudited consolidated financial statements of the Company included in the SEC
Documents filed prior to the date hereof fairly present, in conformity with
generally accepted accounting principles ("GAAP") (except, in the case of the
Form 10-Q's, as may otherwise be permitted by Form 10-Q) applied on a consistent
basis (except as otherwise may be stated in the notes thereto), the consolidated
financial position of the Company and its consolidated Subsidiaries as at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject to normal year-end audit adjustments in the
case of unaudited interim financial statements).
(k) ABSENCE OF CERTAIN CHANGES SINCE BALANCE SHEET DATE. Since
the Balance Sheet Date, the business and operations of the Company have been
conducted in the ordinary course consistent with past practice, and there has
not been:
(i) any declaration, setting aside or payment of
any dividend or other distribution of the assets of the Company with respect to
any shares of capital stock of the Company or any repurchase, redemption or
other acquisition by the Company or any subsidiary of the Company of any
outstanding shares of the Company's capital stock;
(ii) any damage, destruction or loss, whether or
not covered by insurance, except for such occurrences, individually and
collectively, that are not material to the Company;
(iii) any waiver by the Company of a valuable
right or of a material debt owed to it, except for such waivers, individually
and collectively, that are not material;
(iv) any material change or amendment to, or any
waiver of any material right under a material contract or arrangement by which
the Company or any of its assets or properties is bound or subject, except for
changes, amendments or waivers that are expressly provided for or disclosed in
this Agreement;
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(v) any change by the Company in its accounting
principles, methods or practices or in the manner it keeps its accounting books
and records, except any such change required by a change in GAAP; or
(vi) any other event or condition of any
character, except for such events and conditions that have not resulted, and
could not reasonably be expected to result, either individually or collectively,
in a Material Adverse Effect.
(l) INTELLECTUAL PROPERTY.
(i) OWNERSHIP OR RIGHT TO USE. The Company has
sole title to and owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents or patent applications, software,
know-how, registered or unregistered trademarks and service marks and any
applications therefor, registered or unregistered copyrights, trade names, and
any applications therefor, trade secrets or other confidential or proprietary
information ("INTELLECTUAL PROPERTY") necessary to enable the Company to carry
on its business as currently conducted, except where any deficiency, or group of
deficiencies, would not have a Material Adverse Effect.
(ii) NO INFRINGEMENT. Except as set forth in the
Disclosure Letter, the Company has not violated or infringed in any material
respect, and is not currently violating or infringing in any material respect,
and the Company has not received any communications alleging that the Company
(or any of its employees or consultants) has violated or infringed, any
Intellectual Property of any other person or entity.
(iii) YEAR 2000 COMPLIANCE.
(A) All of the Company's and its
Subsidiaries' material products (including products currently under
development) will record, store, process and calculate and present calendar
dates falling on and after December 31, 1999, and will calculate any
information dependent on or relating to such dates in the same manner and
with the same functionality, data integrity and performance as the products
record, store, process, calculate and present calendar dates on or before
December 31, 1999, or calculate any information dependent on or relating to
such dates (collectively, "YEAR 2000 COMPLIANT"). All of the Company's and
its Subsidiaries' material products will lose no significant functionality
with respect to the introduction of records containing dates falling on or
after December 31, 1999. To the best knowledge of the Company, all of the
Company's and its Subsidiaries' internal computer systems comprised of
software, hardware, databases or embedded control systems (microprocessor
controlled, robotics or other device) related to the Company's and its
Subsidiaries' businesses (collectively, a "BUSINESS SYSTEM"), that
constitutes any material part of, or is used in connection with the use,
operation or enjoyment of, any material tangible or intangible asset or real
property of the Company and its Subsidiaries, including its accounting
systems, are Year 2000 Compliant. The current versions of the Company's and
its Subsidiaries' software and all other Intellectual Property may be used
prior to, during and after December 31, 1999, such that such software and
Intellectual Property will operate prior to, during and after such time
period without error caused by date data that represents or references
different centuries or more than one century.
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(B) To the knowledge of the Company, all of the
Company's products and the conduct of the Company's business with customers and
suppliers will not be materially adversely affected by the advent of the year
2000, the advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-first century. To
the knowledge of the Company, neither the Company nor any of its subsidiaries is
reasonably likely to incur material expenses arising from or relating to the
failure of any of its Business Systems or any products (including all products
sold on or prior to the date hereof) as a result of the advent of the year 2000,
the advent of the twenty-first century or the transition from the twentieth
century through the year 2000.
(m) FULL DISCLOSURE. The information contained in this
Agreement, the Disclosure Letter and the SEC Documents with respect to the
business, operations, assets, results of operations and financial condition of
the Company, and the transactions contemplated by this Agreement , are true and
complete in all material respects and do not omit to state any material fact or
facts necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE INVESTOR.
The Investor hereby represents and warrants to the Company, and agrees that:
(a) ORGANIZATION GOOD STANDING AND QUALIFICATION. The Investor
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and authority required
to carry on its business as presently conducted, to enter into this Agreement
and the Warrants and to consummate the transactions contemplated hereby and
thereby.
(b) AUTHORIZATION. The execution of this Agreement and the
Warrants has been duly authorized by all necessary corporate action on the part
of the Investor. Each of this Agreement and the Warrants constitutes the
Investor's legal, valid and binding obligation, enforceable in accordance with
its terms, except (a) as may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies, and (b) as rights
to indemnity or contribution may be limited under federal or state securities
laws or by principles of public policy thereunder.
(c) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Investor is required in connection with the purchase of the Purchased Shares
or the Warrants or the Warrant Shares by the Investor, except for compliance
with the HSR Requirements in connection with the issuance of the Warrant Shares.
(d) PURCHASE FOR OWN ACCOUNT. The Purchased Shares, the
Warrants and, upon exercise of the Warrants, the Warrant Shares, are being
acquired for investment for the Investor's own account, not as a nominee or
agent, and not with a view to the public resale or distribution thereof within
the meaning of the Securities Act, and the Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same. The
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Investor also represents that it has not been formed for the specific purpose of
acquiring the Purchased Shares, the Warrants or the Warrant Shares.
(e) INVESTMENT EXPERIENCE. The Investor understands that the
purchase of the Purchased Shares, the Warrants and the Warrant Shares involves
substantial risk. The Investor has experience as an investor in securities of
companies and acknowledges that it is able to fend for itself, can bear the
economic risk of its investment in the Purchased Shares, the Warrants and the
Warrant Shares and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of this investment
in the Purchased Shares, the Warrants and the Warrant Shares and protecting its
own interests in connection with this investment.
(f) ACCREDITED INVESTOR STATUS. The Investor is an "accredited
investor" within the meaning of Regulation D promulgated under the Securities
Act. The Investor has not incurred, and will not incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or the acquisition of the
Purchased Shares, the Warrants or the Warrant Shares.
(g) RESTRICTED SECURITIES. The Investor understands that the
Purchased Shares, the Warrants and the Warrant Shares are characterized as
"restricted securities" under the Securities Act, inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that such securities may be resold under the Securities Act and applicable
regulations thereunder only pursuant to a registration statement under the
Securities Act or an exemption therefrom. The Investor is familiar with Rule 144
of the SEC, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
(h) DISCLOSURE OF INFORMATION. The Investor acknowledges that
it has been furnished (i) with substantially the same kind of information
regarding the Company and its business, assets, results of operation, and
financial condition as would be contained in a registration statement prepared
in connection with a public sale of the Purchased Shares, the Warrants and the
Warrant Shares and (ii) copies of all the Company's SEC filings since December
31, 1996. The Investor has had an opportunity to review all such information
about the Company as the Investor desires and has been given an opportunity to
ask questions and receive answers about the Company. The Investor hereby
acknowledges that the Company has not made any representations or warranties to
the Investor with respect to the value of the Purchased Shares, the Warrants and
the Warrant Shares, and the actual value of thereof may be more or less than the
consideration being paid therefor pursuant to this Agreement and the Warrants.
(i) LEGENDS. The Investor agrees that the certificates for the
Purchased Shares, the Warrants and the Warrant Shares shall bear a legend in
substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or with any state
securities commission, and may not be transferred or disposed
of by the holder in the absence of a registration statement
which is effective
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under the Securities Act of 1933 and applicable state laws
and rules, or, unless, immediately prior to the time set
for transfer, such transfer may be effected without
violation of the Securities Act of 1933 and other
applicable state laws and rules."
In addition, the Investor agrees that the Company may place stop transfer orders
with its transfer agents with respect to such certificates. The appropriate
portion of the legend and the stop transfer orders will be removed promptly upon
delivery to the Company of such satisfactory evidence as reasonably may be
required by the Company that such legend or stop orders are not required to
ensure compliance with the Securities Act.
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING.
The obligations of the Investor under Sections l and 2 of this Agreement are
subject to the fulfillment or waiver, on or before the Closing, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct in all material respects on and as of the date hereof and on
and as of the date of the Closing, except as set forth in the Disclosure Letter
or the SEC Documents, with the same effect as though such representations and
warranties had been made as of the Closing.
(b) PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
(c) SECURITIES EXEMPTIONS. The offer and sale of the Purchased
Shares and the Warrants to the Investor pursuant to this Agreement shall be
exempt from the registration requirements of the Securities Act and the
registration and/or qualification requirements of all applicable state
securities laws.
(d) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor, and the Investor shall have received all such
counterpart originals and certified or other copies of such documents as it may
reasonably request. Such documents shall include but not be limited to the
following:
(i) CERTIFIED CHARTER DOCUMENTS. A copy of (i)
the Articles of Incorporation certified as of a recent date by the Secretary of
State of Texas as a complete and correct copy thereof, and (ii) (iii) the Bylaws
of the Company (as amended through the date of the Closing) certified by the
Secretary of the Company as a true and correct copy thereof as of the Closing.
(ii) BOARD RESOLUTIONS. A copy, certified by the
Secretary of the Company, of the resolutions of the Board of Directors of the
Company providing for the approval of this Agreement and the Warrants and the
issuance of the Purchased Shares, the Warrants and the Warrant Shares, and the
other matters contemplated hereby and thereby.
10
(iii) REGISTRAR AND TRANSFER AGENT CERTIFICATE. A
certificate, executed by the Company's registrar and transfer agent certifying
the number of outstanding shares of Common Stock of the Company as of a recent
date reasonably acceptable to the Investor.
(e) OPINION OF COMPANY COUNSEL. The Investor will have
received an opinion on behalf of the Company, dated as of the date of the
Closing, from counsel to the Company, in the form attached as EXHIBIT C.
(f) NO MATERIAL ADVERSE EFFECT. Between the date hereof and
the Closing, there shall not have occurred any event constituting a Material
Adverse Effect.
(g) OTHER ACTIONS. The Company shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary or reasonably requested by the Investor in
connection with the transactions contemplated hereby.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of the Investor contained in Section 4 shall be true and correct
in all material respects on and as of the date hereof and on and as of the date
of the Closing with the same effect as though such representations and
warranties had been made as of the Closing.
(b) PERFORMANCE. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing and shall have obtained all approvals, consents and qualifications
necessary to complete the purchase and sale described herein.
(c) PAYMENT OF PURCHASE PRICE. The Investor shall have
delivered to the Company the Purchase Price as specified in Section 1(b).
(d) SECURITIES EXEMPTIONS. The offer and sale of the Purchased
Shares and the Warrants to the Investor pursuant to this Agreement shall be
exempt from the registration requirements of the Securities Act and the
registration and/or qualification requirements of all applicable state
securities laws.
(e) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto will be reasonably satisfactory in form and
substance to the Company and to the Company's legal counsel, and the Company
will have received all such counterpart originals and certified or other copies
of such documents as it may reasonably request.
(f) NASDAQ REQUIREMENTS. All requirement of the Nasdaq
National Market in connection with the transactions contemplated by this
Agreement shall have been complied with (provided that the Investor acknowledges
that the certificate representing the Purchased Shares will not be physically
delivered to the Investor until the expiration of the Nasdaq imposed
11
waiting period relating to listing applications, which shall not in any event
be more than 14 business days after the Closing Date).
7. COVENANTS AND AGREEMENTS OF THE PARTIES.
(a) INFORMATION RIGHTS.
(i) FINANCIAL INFORMATION. The Company covenants
and agrees that, commencing on the Closing and continuing for so long as the
Investor holds at least ten percent (10%) the Purchased Shares (such number to
be proportionately adjusted for stock splits, stock dividends and similar
events), the Company shall:
(A) ANNUAL REPORTS. Furnish to the
Investor promptly following the filing of such report with the SEC a copy of the
Company's Annual Report on Form 10-K for each fiscal year. In the event the
Company shall no longer be required to file Annual Reports on Form 10-K, the
Company shall, within ninety (90) days following the end of each respective
fiscal year, deliver to the Investor a copy of a consolidated balance sheet as
of the end of such fiscal year, a consolidated statement of income and a
consolidated statement of cash flows of the Company and its Subsidiaries for
such year, setting forth in each case in comparative form the figures from the
Company's previous fiscal year, all prepared in accordance with generally
accepted accounting principles and practices and audited by nationally
recognized independent certified public accountants.
(B) QUARTERLY REPORTS. Furnish to the
Investor promptly following the filing of such report with the SEC, a copy of
each of the Company's Quarterly Reports on Form 10-Q. In the event the Company
shall no longer be required to file Quarterly Reports on Form 10-Q, the Company
shall, within forty-five (45) days following the end of each of the first three
(3) fiscal quarters of each fiscal year, deliver to the Investor a copy a
consolidated balance sheet as of the end of the respective fiscal quarter,
consolidated statements of income and consolidated statements of cash flows of
the Company and its Subsidiaries for the respective fiscal quarter and for the
year to-date, setting forth in each case in comparative form the figures from
the comparable periods in the Company's immediately preceding fiscal year, all
prepared in accordance with generally accepted accounting principles and
practices, but all of which may be unaudited.
(ii) SEC FILINGS. The Company shall deliver to
the Investor copies of each other document filed with the SEC on a
non-confidential basis promptly following the filing of such document with the
SEC.
(b) REGISTRATION RIGHTS.
(i) DEFINITIONS. For purposes of this Section
7(b):
(A) REGISTRATION. The terms
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration effected
by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement
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(B) REGISTRABLE SECURITIES. The term
"REGISTRABLE SECURITIES" means: (x) the Purchased Shares and the Warrant Shares
and (y) any shares of Common Stock of the Company or other securities of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security that is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, any of the securities
described in the immediately preceding clause. Notwithstanding the foregoing,
"Registrable Securities" shall exclude any Registrable Securities (i) sold by a
person in a transaction in which rights under this Section 7(b) are not assigned
in accordance with this Agreement or any Registrable Securities sold in a public
offering, whether sold pursuant to Rule 144 promulgated under the Securities
Act, or in a registered offering, or otherwise or (ii) that may then be sold to
the public pursuant to Rule 144.
(C) REGISTRABLE SECURITIES THEN
OUTSTANDING. The number of shares of "REGISTRABLE SECURITIES THEN OUTSTANDING"
shall mean the number of Purchased Shares, shares of Common Stock and other
securities that are Registrable Securities and are then issued and outstanding.
(D) HOLDER. For purposes of this Section
7(b), the term "HOLDER" means any person owning of record Registrable Securities
that have not been sold to the public or pursuant to Rule 144 promulgated under
the Securities Act or any permitted assignee of record of such Registrable
Securities to whom rights under this Section 7(b) have been duly assigned in
accordance with this Agreement.
(E) FORM S-3. The term "FORM S-3" means
such form under the Securities Act as is in effect on the date hereof or any
successor registration form under the Securities Act subsequently adopted by the
SEC that permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(ii) DEMAND REGISTRATION.
(A) REQUEST BY HOLDERS. If (i) the
Company shall, following the Closing, receive a written request from the Holders
of twenty-five percent (25%) of the Registrable Securities, that the Company
file a registration statement under the Securities Act on Form S-3 or, if Form
S-3 is not then available for use by the Company, then such other form as such
Holders (upon the advice of the underwriters, if any, engaged by such Holders)
may request (including a "shelf" registration statement, if requested by such
Holders, during any period of time that Rule 144 is not available as an
exemption for the sale in a single 90-day period of all of the Registrable
Securities that any such Holder desires to sell, in which case the Company would
maintain the effectiveness of such "shelf" registration statement until all such
Registrable Securities are sold under such registration statement or could be
sold under Rule 144 in a single 90-day period, provided that the Company shall
not be required to keep such registration statement effective for longer than
six (6) months after the effective date thereof) covering the registration of
Registrable Securities, and (ii) the expected gross proceeds of the sale of
Registrable Securities under such registration statement would equal or exceed
Five Million Dollars ($5,000,000), then the Company shall, within ten (10)
business days of the receipt of such written request, give written notice of
such request ("REQUEST NOTICE") to all Holders, and use commercially reasonable
efforts to effect, as soon as practicable, the registration under the
13
Securities Act of all Registrable Securities that Holders request to be
registered and included in such registration by written notice given such
Holders to the Company within twenty (20) days after receipt of the Request
Notice; PROVIDED that the Company shall not be obligated to effect any such
registration if the Company has, within the six (6) month period preceding
the date of such request, already effected a registration under the
Securities Act pursuant to Section 7(b)(iii), other than a registration from
which the Registrable Securities of Holders have been excluded with respect
to all or any portion of the Registrable Securities the Holders requested be
included in such registration; PROVIDED, HOWEVER, that the Company shall have
no obligation to cause any registration statement contemplated by this
Section 7(b)(ii) to become effective prior to the one hundred and eightieth
(180th) day after the Closing Date; PROVIDED, FURTHER, that the Company shall
have no obligation to cause any "shelf" registration statement contemplated
by this Section 7(b)(ii) to become effective prior to the first anniversary
of the Closing Date.
(B) UNDERWRITING. If the Holders
initiating the registration request under this Section 7(b)(ii) ("INITIATING
HOLDERS") intend to distribute the Registrable Securities covered by their
request by means of an underwriting, then they shall so advise the Company as a
part of their request, and the Company shall include such information in the
written notice referred to in Section 7(b)(ii)(A). In such event, the right of
any Holder to include his or her Registrable Securities in such registration
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the initiating
Holders and such Holder determined based on the number of Registrable Securities
held by such Holders being registered). All Holders proposing to distribute
their securities through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriters
selected for such underwriting by the Holders of a majority of the Registrable
Securities being registered and reasonably acceptable to the Company (including
a market stand-off agreement of up to ninety (90) days if required by such
underwriters). Notwithstanding any other provision of this Section 7(b)(ii), if
the underwriter(s) advise(s) the Company in writing that marketing factors
require a limitation of the number of securities to be underwritten then the
Company shall so advise all Holders of Registrable Securities that would
otherwise be registered and underwritten pursuant hereto, and the number of
Registrable Securities that may be included in the underwriting shall be reduced
as required by the underwriter(s) and allocated among the Holders of Registrable
Securities on a pro rata basis according to the number of Registrable Securities
requested to be included in such registration by each Holder requesting
registration (including the initiating Holders); PROVIDED, HOWEVER, that the
number of shares of Registrable Securities to be included in such underwriting
and registration shall not be reduced unless all other securities of the Company
and any selling securityholder other than the Holders are first entirely
excluded from the underwriting and registration. Any Registrable Securities
excluded and withdrawn from such underwriting shall be withdrawn from the
registration.
(C) MAXIMUM NUMBER OF DEMAND
REGISTRATIONS. The Company shall be obligated to effect only two (2) such
registrations pursuant to this Section 7(b)(ii).
(D) EXPENSES. All expenses incurred in
connection with any registration pursuant to this Section 7(b)(ii), including
all federal and "blue sky" registration, filing and qualification fees,
printer's and accounting fees, and fees and disbursements of counsel
14
for the Company (but excluding underwriters' discounts and commissions
relating to shares sold by the Holders), shall be borne by the Company. Each
Holder participating in a registration pursuant to this Section 7(b)(ii)
shall bear such Holder's proportionate share (based on the total number of
shares sold in such registration other than for the account of the Company)
of all discounts, commissions or other amounts payable to underwriters or
brokers in connection with such offering by the Holders. Notwithstanding the
foregoing, the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to this Section 7(b)(ii) if the
registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to be registered, unless the
Holders of such majority agree that such registration constitutes the use by
the Holders of one (1) demand registration pursuant to this Section 7(b)(ii)
(in which case such registration shall also constitute the use by all Holders
of Registrable Securities of one (l) such demand registration); PROVIDED
FURTHER, HOWEVER, that if at the time of such withdrawal, the Holders have
learned of a material adverse change relating to the Company not known to the
Holders at the time of their request for such registration and have withdrawn
their request for registration after learning of such material adverse
change, then the Holders shall not be required to pay any of such expenses
and such registration shall not constitute the use of a demand registration
pursuant to this Section 7(b)(ii).
(iii) PIGGYBACK REGISTRATIONS. The Company shall
notify all Holders of Registrable Securities in writing at least thirty (30)
days prior to filing any registration statement under the Securities Act for
purposes of effecting a public offering of securities of the Company (including
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to any employee benefit
plan or any merger or other corporate reorganization) and will afford each such
Holder an opportunity to include in such registration statement all or any part
of the Registrable Securities then held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by such Holder shall within twenty (20) days after receipt of
the above-described notice from the Company, so notify the Company in writing,
and in such notice shall inform the Company of the number of Registrable
Securities such Holder wishes to include in such registration statement. If a
Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(A) UNDERWRITING. If a registration
statement under which the Company gives notice under this Section 7(b)(iii) is
for an underwritten offering, then the Company shall so advise the Holders of
Registrable Securities. In such event, the right of any such Holder's
Registrable Securities to be included in such a registration pursuant shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the managing underwriter or underwriters selected for
such underwriting (including a market stand-off agreement of up to ninety (90)
days if required by such underwriters); PROVIDED, HOWEVER, that it shall not be
considered customary to require any of the Holders to provide representations
and warranties regarding the Company or indemnification of the underwriters for
material misstatements or omissions of the Company in
15
the registration statement or prospectus for such offering. Notwithstanding
any other provision of this Agreement, if the managing underwriter
determine(s) in good faith that marketing factors require a limitation of the
number of shares to be underwritten, then the managing underwriter(s) may
exclude shares from the registration and the underwriting; PROVIDED; HOWEVER,
that the securities to be included in the registration and the underwriting
shall be allocated, (1) FIRST (A) in connection with any registrations
effective after June 30, 2000 other than a registration statement relating to
a demand registration of other shareholders of the Company, to the Company
(PROVIDED, HOWEVER, that a minimum of twenty-five percent (25%) of the number
of Registrable Securities held by each Holder (where any Registrable
Securities that are not shares of Common Stock but are exercisable or
exchangeable for, or convertible into, shares of Common Stock, shall be
deemed to have been so exercised, exchanged or converted for such purpose)
must also in any event be included if requested by any such Holder) or (B) in
connection any registration statement relating to a demand registration of
other shareholders of the Company, such shareholder exercising such demand
registration rights, (2) SECOND, to the extent the managing underwriter
determines additional securities can be included after compliance with clause
(1), to each of the Holders (to the extent not included pursuant to clause
(1)) requesting inclusion of their Registrable Securities in such
registration statement on a pro rata basis based on the total number of
Registrable Securities and other securities entitled to registration
requested to be included by each such Holder, and (3) THIRD, to the extent
the managing underwriter determines additional securities can be included
after compliance with clauses (1) and (2), to all other holders of Common
Stock of the Company having the right to include their shares in such
registration allocated in such manner as they may agree. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration. For any Holder that is a partnership, the
Holder and the partners and retired partners of such Holder, or the estates
and family members of any such partners and retired partners and any trusts
for the benefit of any of the foregoing persons, and for any Holder that is a
corporation, the Holder and all corporations that are affiliates of such
Holder, shall be deemed to be a single "Holder," and any pro rata reduction
with respect to such "Holder" shall be based upon the aggregate amount of
shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
(B) EXPENSES. All expenses incurred in
connection with a registration pursuant to this Section 7(b)(iii) (excluding
underwriters' and brokers' discounts and commissions relating to shares sold by
the Holders), including all federal and "blue sky" registration, filing and
qualification fees, printers' and accounting fees, and fees and disbursements of
counsel for the Company, shall be borne by the Company.
(C) NOT DEMAND REGISTRATION.
Registration pursuant to this Section 7(b)(iii) shall not be deemed to be a
demand registration as described in Section 7(b)(ii) above. Except as otherwise
provided herein, there shall be no limit on the number of times the Holders may
request registration of Registrable Securities under this Section 7(b)(iii).
(iv) FORM S-3 REGISTRATION. If requested by the
Investor, the Company shall use all reasonable commercial efforts to cause to be
filed and become effective with the SEC a Registration Statement on Form S-3
relating to all of the Registrable Securities (in the event such registration
statement is not effective on such date, the Company shall continue to use all
reasonable commercial efforts to cause it to become effective until it becomes
effective), such
16
Registration Statement to be effected only for sales or other transfers by
the Investor in connection with offerings, sales and transfers not
constituting an underwritten public offering; PROVIDED, HOWEVER, that the
Company shall not be obligated to cause such registration statement to become
effective before the one hundred eighty-first (181st) day following the
Closing Date; provided, further, that in the event Form S-3 is not available
to the Company, then the Company shall not be required to effect any such
registration, in which event the Investor will, if it still desires to have
such shares registered, need to request a demand registration under Section
7(b)(ii) above. The Company shall use its best efforts to cause any such
Registration Statement to become effective as promptly as possible after such
filing (but shall not be required to cause such Registration Statement to
become effective prior to the one hundred eighty-first (181st) day following
the Closing Date) and shall also use its best efforts to obtain any related
qualifications, registrations or other compliances that may be necessary
under any applicable "blue sky" laws. In connection with such registration,
the Company will:
(A) NOTICE. Promptly give written notice
to the Holders of the proposed registration and any related qualification or
compliance; and
(B) REGISTRATION. Effect such
registration and all such qualifications and compliances and as would permit or
facilitate the sale and distribution of all or such portion of such Holders or
Holders' Registrable Securities on and after the one hundred and eightieth
(180th) day following the Closing Date; PROVIDED, HOWEVER, that the Company
shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 7(b)(iv) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(C) EXPENSES. The Company shall pay all
expenses incurred in connection with each registration requested pursuant to
this Section 7(b)(iv), excluding underwriters' or brokers' discounts and
commissions relating to shares sold by the Holders, including federal and "blue
sky" registration, filing and qualification fees, printers' and accounting fees,
and fees and disbursements of counsel.
(D) NOT DEMAND REGISTRATION. Form S-3
registrations shall not be deemed to be demand registrations as described in
Section 7(b)(ii) above.
(E) MAINTENANCE. The Company shall use
all reasonable commercial efforts to maintain the effectiveness of any Form S-3
registration statement filed under this Section 7(b)(iv) until the earlier of:
(a) the date on which all of the Registrable Securities have been sold; and (b)
the six-month anniversary of the effective date of such registration statement;
PROVIDED, HOWEVER, that unless all of the Registrable Securities held by the
Investor as of such six-month anniversary could then be sold in a single
transaction in accordance with Rule 144 under the Securities Act without
exceeding the volume limitations thereof, if the Company receives written notice
from the Investor that the Investor may be deemed to be an "affiliate" of the
Company for purposes of the Securities Act, the date in this clause E shall be
extended until the Investor advises the Company that it no longer believes it
may be deemed such an "affiliate."
17
(F) MAXIMUM NUMBER OF FORM S-3
REGISTRATIONS. The Company shall be obligated to effect only five (5) such
registrations pursuant to this Section 7(b)(iv).
(v) OBLIGATIONS OF THE COMPANY. Whenever
required to effect the registration of any Registrable Securities under this
Agreement the Company shall, as expeditiously as reasonably possible:
(A) REGISTRATION STATEMENT. Prepare and
file with the SEC a registration statement with respect to such Registrable
Securities and use commercially reasonable efforts to cause such registration
statement to become effective; PROVIDED, HOWEVER, that, except as otherwise
required by this Section 7(b), the Company shall not be required to keep any
such registration statement effective for more than ninety (90) days.
(B) AMENDMENTS AND SUPPLEMENTS. Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement.
(C) PROSPECTUSES. Furnish to the Holders
such number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by them that are included in such registration.
(D) BLUE SKY. Use commercially
reasonable efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(E) UNDERWRITING. In the event of any
underwritten public offering, enter into and perform its obligations under an
underwriting agreement in usual and customary form (including customary
indemnification of the underwriters by the Company), with the managing
underwriter(s) of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement;
PROVIDED, HOWEVER, that it shall not be considered customary to require any of
the Holders to provide representations and warranties regarding the Company or
indemnification of the underwriters for material misstatements or omissions of
the Company in the registration statement or prospectus for such offering.
(F) NOTIFICATION. Notify each Holder of
Registrable Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement
18
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing. In such event, the Company shall
prepare a supplement or post-effective amendment to such registration
statement or related prospectus or file any other required document so that,
as thereafter delivered to the purchasers of Registrable Securities sold
thereunder, the prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(G) OPINION AND COMFORT LETTER. Furnish,
at the request of any Holder requesting registration of Registrable Securities,
on the date that such Registrable Securities are delivered to the underwriters
for sale, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated as of such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) in the event that such securities are being sold through underwriters, a
"comfort" letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters.
(vi) FURNISH INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to
Sections 7(b)(ii), (iii) or (iv) that the selling Holders shall furnish to the
Company such information regarding themselves, the Registrable Securities held
by them, and the intended method of disposition of such securities as shall be
required to timely effect the registration of their Registrable Securities.
(vii) INDEMNIFICATION. In the event any
Registrable Securities are included in a registration statement under Sections
7(b)(ii), (iii) or (iv):
(A) BY THE COMPANY. To the extent
permitted by law, the Company will indemnify and hold harmless each Holder, the
partners, officers, shareholders, employees, representatives and directors of
each Holder, any underwriter (as determined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"):
(x) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto;
19
(y) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or
(z) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any federal or
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any federal or state securities law in connection with
the offering covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer, shareholder,
employee, representative, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon (i) a
Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, shareholder, employee, representative, director,
underwriter or controlling person of such Holder, (ii) any failure by such
Holder to deliver a copy of the registration statement or prospectus or any
amendment or supplement thereto as required by the Securities Act or the rules
or regulations thereunder, or (iii) any failure by such Holder to stop using the
registration statement or prospectus or any amendment or supplement thereto
after receipt of written notice from the Company to stop.
(B) BY SELLING HOLDERS. To the extent
permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
registration statement, each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, officers, shareholders, employees, representatives and directors and
any person who controls such Holder within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such officer or director, controlling
person, underwriter or other such Holder, partner, officer, shareholder,
employee, representative, director or controlling person of such other Holder
may become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any (i) Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration, (ii) any failure
by such Holder to deliver a copy of the registration statement or prospectus or
any amendment or supplement thereto as required by the Securities Act or the
rules or regulations thereunder, or (iii) any failure by such Holder to stop
using the registration statement or prospectus or any amendment or supplement
thereto after receipt of written notice from the Company to stop; and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such officer or director, controlling person, underwriter or
other Holder, partner, officer, shareholder, employee,
20
representative, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action: PROVIDED, HOWEVER, that the indemnity agreement
contained in this subsection shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder, which consent shall not be
unreasonably withheld; and PROVIDED FURTHER, that the total amounts payable
in indemnity by a Holder under this subsection or otherwise in respect of any
and all Violations shall not exceed in the aggregate the net proceeds
received by such Holder in the registered offering out of which such
Violations arise.
(C) NOTICE. Promptly after receipt by an
indemnified party under of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this section, deliver
to the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, to the extent that representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential conflict of interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
liability except to the extent the indemnifying party is prejudiced as a result
thereof.
(D) DEFECT ELIMINATED IN FINAL
PROSPECTUS. The foregoing indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any Violation made in a
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "FINAL PROSPECTUS"), such indemnity agreement shall not inure to the
benefit of any person if a copy of the Final Prospectus was timely furnished to
the indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
(E) CONTRIBUTION. In order to provide
for just and equitable contribution to joint liability under the Securities Act
in any case in which either (i) any Holder exercising rights under this
Agreement, or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this section, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this section provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
selling Holder or any such controlling person in circumstances for which
indemnification is provided under this section; then, and in each such case, the
Company and such Holder will contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion represented
by
21
the percentage that the public offering price of its Registrable Securities
offered by and sold under the registration statement bears to the public
offering price of all securities offered by and sold under such registration
statement, and the Company and other selling Holders are responsible for the
remaining portion; PROVIDED, HOWEVER, that, in any such case: (A) no such
Holder will be required to contribute any amount in excess of the public
offering price of all such Registrable Securities offered and sold by such
Holder pursuant to such registration statement; and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 12(f)
of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
(F) SURVIVAL. The obligations of the
Company and Holders under this Section 7(b)(vii) shall survive until the third
anniversary of the completion of any offering of Registrable Securities in a
registration statement, regardless of the expiration of any statutes of
limitation or extensions of such statutes.
(viii) TERMINATION OF THE COMPANY'S OBLIGATIONS.
The Company shall have no obligations pursuant to this Section 7(b) with respect
to any Registrable Securities proposed to be sold by a Holder in a registration
pursuant to Section 7(b)(ii), (iii) or (iv) more than five (5) years after the
Closing Date.
(ix) NO SUPERIOR REGISTRATION RIGHTS TO THIRD
PARTIES. Without the prior written consent of the Holders of a majority of the
Purchased Shares, the Company covenants and agrees that it shall not grant, or
cause or permit to be created, for the benefit of any person or entity any
registration rights of any kind (whether similar to the demand, "piggyback" or
Form S-3 registration rights described in this Section 7, or otherwise) relating
to shares of the Company's Common Stock or any other securities of the Company
that are superior to the rights granted under this Section 7(b).
(x) SUSPENSION PROVISIONS. Notwithstanding the
foregoing subsections of this Section 7(b), the Company shall not be required to
take any action with respect to the registration or the declaration of
effectiveness of the registration statement following written notice to the
Holders from the Company (a "SUSPENSION NOTICE") of the existence of any state
of facts or the happening of any event (including pending negotiations relating
to, or the consummation of, a transaction, or the occurrence of any event that
the Company believes, in good faith, requires additional disclosure of material,
non-public information by the Company in the registration statement that the
Company believes it has a bona fide business purpose for preserving
confidentiality or that renders the Company unable to comply with the published
rules and regulations of the SEC promulgated under the Securities Act or the
Exchange Act, as in effect at any relevant time (the "RULES AND REGULATIONS"))
that would result in (1) the registration statement, any amendment or
post-effective amendment thereto, or any document incorporated therein by
reference containing an untrue statement of a material fact or omitting to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (2) the prospectus issued under the
registration statement, any prospectus supplement, or any document incorporated
therein by reference including an untrue statement of material fact or omitting
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
PROVIDED that the Company (1) shall not issue a Suspension Notice more than once
in any twelve (12)
22
month period, (2) shall use its best efforts to remedy, as promptly as
practicable, but in any event within ninety (90) days of the date on which
the Suspension Notice was delivered, the circumstances that gave rise to the
Suspension Notice and deliver to the Holders notification that the Suspension
Notice is no longer in effect and (3) shall not issue a Suspension Notice for
any period during which the Company's executive officers are not similarly
restrained from disposing of shares of the Company's Common Stock. Upon
receipt of a Suspension Notice from the Company, all time limits applicable
to the Holders under this Section 7(b) shall automatically be extended by an
amount of time equal to the amount of time the Suspension Notice is in
effect, the Holders will forthwith discontinue disposition of all such shares
pursuant to the registration statement until receipt from the Company of
copies of prospectus supplements or amendments prepared by or on behalf of
the Company (which the Company shall prepare promptly), together with a
notification that the Suspension Notice is no longer in effect, and if so
directed by the Company, the Holders will deliver to the Company all copies
in their possession of the prospectus covering such shares current at the
time of receipt of any Suspension Notice.
(xi). "MARKET STAND-OFF" AGREEMENT; LIMITED
SHAREHOLDER PARTICIPATION.
(A) The Company and Investor agree that:
(1) prior to June 30, 2000, the Company shall not allow the shareholders of the
Company other than Investor to sell more than ten percent (10%) of the total
shares being sold in any registered offering of securities of the Company
(including registration statements relating to secondary offerings of securities
of the Company, but excluding registration statements relating to any employee
benefit plan or any merger or other corporate reorganization) and (2) such ten
percent (10%) of such offering shall be shared among the shareholders of the
Company other than Investor as the Company shall determine; provided however,
that these Sections 7(xi)(A)(1) and (2) shall not apply if, in such
registration, Investor is able to register all of Investor's Registrable
Securities.
(B) Investor hereby agrees that it shall
not, to the extent requested by the Company or an underwriter of securities of
the Company, sell or otherwise transfer or dispose of any Registrable Securities
(other than to subsidiaries, partners or affiliates of the Investor who agree to
be similarly bound) prior the earlier of (1) June 30, 2000 or (2) the completion
of the Company's first underwritten offering of its securities to be sold to the
public after the date of this Agreement; provided however, that all executive
officers and directors enter into similar agreements or sell in accordance with
Section 7(xi)(A). In order to enforce the foregoing covenant, the Company shall
have the right to place restrictive legends on the certificates representing the
shares subject to this Section and to impose stop transfer instructions with
respect to the Registrable Securities and such other shares of stock of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
(c) OBLIGATIONS REGARDING CONFIDENTIAL
INFORMATION. Confidential Information (as defined below) shall not be disclosed
by any party hereto to any third party except in accordance with the provisions
set forth below. For purposes of this Agreement, the term "CONFIDENTIAL
INFORMATION" refers to the following items: (i) the existence of this
23
Agreement and the Warrants, and (ii) the terms and provisions of this
Agreement and the Warrants, PROVIDED, HOWEVER, that Confidential Information
shall not include any information that was (i) publicly known and generally
available in the public domain prior to its disclosure by the Company, (ii)
becomes publicly known and generally available in the public domain through
no action or inaction on the part of the Company or (iii) becomes publicly
known by written consent or other action of the Investor.
(i) PRESS RELEASES, ETC. Within ten (10) days of
the Closing, the Company may issue a press release in the form provided by
Investor disclosing that Investor has invested in the Company; provided that the
final form of the press release is approved in advance in writing by Investor.
No other announcement regarding the Confidential Information in a press release,
conference, advertisement, announcement, professional or trade publication, mass
marketing materials or otherwise may be made without the prior written consent
of Investor.
(ii) PERMITTED DISCLOSURES. Notwithstanding the
foregoing, (i) any party may disclose any of the Confidential Information to its
current or bona fide prospective investors, employees, investment bankers,
lenders, accountants and attorneys, in each case only where such persons or
entities are under appropriate nondisclosure obligations (the Company shall be
responsible for any failure of any such person to comply with the provisions of
this Section 7(c)); (ii) the Company may disclose the fact that Investor is an
investor in the Company to third parties without the requirement for
nondisclosure agreements and (iii) the Investor may disclose its investment in
the Company and other Confidential Information to third parties or to the public
at its sole discretion and, if it does so, the Company shall have the right to
disclose to third parties any such information disclosed in a press release or
other public announcement by the Investor.
(iii) LEGALLY COMPELLED DISCLOSURE. Except to the
extent required by law or judicial or administrative order or except as provided
herein, the Company shall not disclose any Confidential Information without the
Investor's prior written approval; provided, however, that the Company may
disclose any Confidential Information, to the extent required by law or judicial
or administrative order, provided that if such disclosure is pursuant to
judicial or administrative order, the Company will notify the Investor promptly
before such disclosure and will cooperate with the Investor to seek confidential
treatment with respect to the disclosure if requested by the Investor and
provided further that if such disclosure is required pursuant to law or the
rules and regulations of any federal, state or local governmental authority or
any regulatory body, the parties will cooperate to seek confidential treatment
to the maximum extent, in the reasonable judgment of counsel of the Company,
possible under law. Notwithstanding the foregoing provisions or any other
provision to the contrary, the Company agrees that, except to the extent
required by judicial or administrative order, which the Company shall resist to
the maximum extent possible under law, the Company will not file this Agreement
(the "EXHIBIT FILING") with any governmental authority or any regulatory body;
PROVIDED, HOWEVER, that to the extent required under the Rules and Regulations,
upon the advice of counsel and subject to any request by Investor to seek
confidential treatment, the Company may (A) file this Agreement and the Warrants
as an exhibit to any filing required to be made by the Company under the
Exchange Act, (B) identify the Investor as "Intel Corporation" and (C) describe
the material terms of the Investor's investment. The Investor hereby
acknowledges that the Company has advised Investor
24
that the Company has been advised by its counsel that such counsel believes
that the Company will be required to file this Agreement and the Warrants as
exhibits to the Form 10-K that the Company will be required to file under the
Exchange Act for its fiscal year ending March 31, 2000. The Company agrees
that it will provide the Investor with drafts of any documents, press
releases or other filings (including the filing permitted by the proviso of
the immediately preceding sentence) in which the Company desires to disclose
this Agreement and the Warrants, the transactions contemplated hereby or
thereby or any other Confidential Information is disclosed at least three (3)
business days prior to the filing or disclosure thereof, and that it will
make any changes to such materials as requested by the Investor unless
advised by counsel that the Rules and Regulations require otherwise. Unless
permitted by the terms of this Section 7(c), the Company will not disclose
any Confidential Information or file this Agreement or the Warrants if the
Investor has objected to such disclosure or filing. The Company will not,
except as permitted above, file this Agreement or the Warrants with any
governmental authority or any regulatory body, or disclose the identity of
the Investor or any other Confidential Information in any filing.
(iv) OTHER INFORMATION. The provisions of this
Section 7(c) shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by any of the
parties hereto with respect to the transactions contemplated hereby. Additional
disclosures and exchange of confidential information between the Company and the
Investor shall be governed by the terms of the Corporate Non-Disclosure
Agreement No. 127931, effective June 1, 1999, executed by the Company and the
Investor.
(d) RIGHTS OF PARTICIPATION.
(i) GENERAL. As used in this Agreement, the
"Rights Period" means the period from the date hereof until the earlier of: (1)
such time as the Investor, together with its Subsidiaries, no longer hold the
equivalent of at least twenty-five percent (25%) of the Purchased Shares, such
number to be proportionately adjusted for stock splits, stock dividends and
similar events, or (2) December 31, 2005. During the Rights Period, the Investor
and each other person or entity to whom rights under this Section 7(d) have been
duly assigned (each of the Investor and each such assignee, a "PARTICIPATION
RIGHTS HOLDER") shall have a right of first refusal to purchase such
Participation Rights Holder's Pro Rata Share (as defined below) of all New
Securities (as defined below) that the Company may from time to time issue
during such period (such New Securities would be allocated among the
Participation Rights Holders who elect to exercise their right to purchase such
New Securities on a pro rata basis according to the number of Purchased Shares
held by each such Participation Rights Holder. The rights described in the
preceding sentence, as further described in this Section 7(d), are referred to
as the "RIGHT OF PARTICIPATION".
(ii) PRO RATA SHARE. "PRO RATA SHARE" means, with
respect to each Participation Rights Holder, the ratio of the following numbers
calculated immediately prior to the issuance of the New Securities giving rise
to the Right of Participation: (A) the Participant Share Number (as defined
below) for such Participation Rights Holder, to (B) the sum of (a) the total
number of shares of Common Stock and other voting capital stock of the Company
then outstanding, PLUS (b) the number of shares of voting capital stock issuable
upon the exercise, conversion or exchange of any other security of the Company
then outstanding.
25
(iii) NEW SECURITIES. "NEW SECURITIES" means any
Common Stock, preferred stock or other voting capital stock or security of the
Company, whether now authorized or not, and rights, options or warrants to
purchase such Common Stock or preferred stock or other voting capital stock or
security, and securities of any type whatsoever that are, or may become,
convertible into or exchangeable or exercisable for Common Stock, preferred
stock or other voting capital stock or security; PROVIDED, HOWEVER, that the
term New Securities shall not include:
(A) any shares of Common Stock (or
options, rights, awards to acquire, or warrants therefor) issued to employees,
officers, directors or consultants of the Company pursuant to any stock
purchase, stock option, stock incentive, equity incentive, and other employee
benefit plans, and agreements having similar purpose and effect, in effect on
the Closing Date or approved by the Board of Directors after the Closing Date;
(B) the Purchased Shares issued under
this Agreement;
(C) shares of Common Stock issued upon
exercise of any warrant issued to Investor;
(D) any securities issued in connection
with any stock split stock, dividend or other similar event in which all
Participation Rights Holders are entitled to participate on a pro rata basis;
(E) any securities issued upon the
exercise, conversion or exchange of any outstanding security if such outstanding
security constituted a New Security;
(F) any securities issued pursuant to
the acquisition of another Person, or subsidiary or division thereof, by the
Company by consolidation, merger, purchase of assets, or other reorganization;
or
(G) any shares of capital stock of the
Company, or any options, warrants, rights or other securities convertible into,
exercisable for or exchangeable into shares of capital stock of the Company, (i)
issued to a bank lender to the Company (or any other person that lends money to
the Company) or (ii) offered and sold by the Company pursuant to a registration
statement filed under the Securities Act.
(iv) PARTICIPANT SHARE NUMBER. "PARTICIPANT SHARE
NUMBER", with respect to a Participant Rights Holder, means the sum of (1) the
number of Purchased Shares held by such Participant, and (2) the number of
shares of Common Stock or other voting capital stock or security issuable upon
the exercise, conversion or exchange of any other security of the Company held
by such Participant.
(v) PURCHASE PRICE. The purchase price paid by
the Participant Rights Holder for the New Securities shall equal the sales price
of the New Securities.
(vii) PROCEDURES. If the Company proposes to
undertake an issuance of New Securities (in a single transaction or a series of
related transactions) in circumstances that entitled a Participation Rights
Holder to participate therein in accordance this Section 7(d), the
26
Company shall give to each Participation Rights Holder written notice of its
intention to issue New Securities (the "PARTICIPATION NOTICE"), describing
the amount and the type of New Securities and the price and the general terms
upon which the Company proposes to issue such New Securities. Each
Participation Rights Holder shall have fifteen (15) business days from the
date of receipt of any such Participation Notice to agree in writing to
purchase up to the maximum number of such New Securities that such
Participation Rights Holder is entitled to purchase for the purchase price
specified in Section 7(d)(v) above and upon the terms and conditions
specified in the Participation Notice by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased (not to
exceed such maximum). If any Participation Rights Holder fails to so agree in
writing within such 15 business day period, then such Participation Rights
Holder shall forfeit the right hereunder to participate in such sale of New
Securities. All sales hereunder shall be consummated concurrently with the
closing of the transaction triggering the Right of Participation.
(ix) FAILURE TO EXERCISE. Upon the expiration of
such fifteen (15) business day period, the Company shall have one hundred twenty
(120) days thereafter, subject to extensions for regulatory compliance, to sell
the New Securities described in the Participation Notice (with respect to which
the Participation Rights Holders' rights of first refusal hereunder were not
exercised), or enter into an agreement to do so within sixty (60) days
thereafter (which agreement must be consummated within one hundred twenty (120)
days after its execution, subject to extensions for regulatory compliance), at
the price (or a higher price) and upon non-price terms not materially more
favorable to the purchasers thereof than specified in the Participation Notice.
If the Company has not issued and sold such New Securities within such 120-day
period, or entered into an agreement to do so within sixty (60) days thereafter
(and consummated such agreement within such 120-day period), then the Company
shall not thereafter issue or sell any New Securities without again first
offering such New Securities to the Participation Rights Holders pursuant to
this Section 7(d).
(e) RIGHTS IN THE EVENT OF A CORPORATE EVENT.
(i) CORPORATE EVENTS. A "CORPORATE EVENT" shall
mean any of the following, whether accomplished through one or a series of
related transactions: (A) any transaction, other than an issuance of securities
in connection with the acquisition of an unaffiliated third party in an arms
length transaction, that results in a greater than fifty percent (50%) change in
the total outstanding number of voting securities (which, for purposes of this
Agreement, shall mean all securities of the Company that presently are, or would
be upon conversion, exchange or exercise, entitled to vote in the election of
directors) of the Company immediately prior to such issuance (other than any
such change solely as a result of a stock split, stock dividend or other
recapitalization affecting holders of Common Stock and other classes of voting
securities of the Company on a pro rata basis); (B) an acquisition of the
Company by consolidation, merger (regardless of whether the Company is the
survivor of such merger or not), share purchase or exchange or other
reorganization or transaction in which the holders of the Company's outstanding
voting securities immediately prior to such transaction own, immediately after
such transaction, securities representing less than a majority of the voting
power of the Company or the Person issuing such securities or surviving such
transaction, as the case may be; (C) the acquisition of all or substantially all
the assets of the Company; and (D) any transaction or series of related
transactions that results in the failure of the majority of the members of the
27
Board immediately prior to the closing of such transaction or series of related
transactions failing to constitute a majority of the Board (or its successor)
immediately following such transaction or series of related transactions.
(ii) NOTICE OF CORPORATE EVENTS. Until such time
as the Investor no longer holds at least twenty-five percent (25%) of the
Purchased Shares (such number to be proportionately adjusted for stock splits,
stock dividends and similar events), the Company shall provide the Investor with
written notice of terms of any offer (written or oral) from any Person for a
proposed Corporate Event. Any notice shall be delivered to the Investor as soon
as practicable but no later than five (5) business days after the date the
Company first becomes aware of such offer or proposed Corporate Event. Without
limiting the generality of the foregoing, such notice shall set forth the
identity(ies) of the Person(s) involved, the consideration to be paid and all
other material terms and conditions. If such offer is in writing (whether in the
form of a letter of intent, term sheet or otherwise), the Company shall deliver
a copy thereof to the Investor.
8. INDEMNIFICATION.
(a) AGREEMENT TO INDEMNIFY.
(i) COMPANY INDEMNITY. The Investor, its
Affiliates and Associates, and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively, the "INVESTOR
INDEMNITEES") shall each be indemnified and held harmless to the extent set
forth in this Section 8 by the Company with respect to any and all Damages (as
defined below) incurred by any Investor Indemnitee as a proximate result of any
misrepresentation in, or breach of, any representation, warranty, covenant or
agreement made by the Company in this Agreement (including any exhibits and
schedules hereto); provided, however, no Investor Indemnitee may make a claim
for indemnification hereunder unless the aggregate amount of such Damages
(together with all concurrent or prior claims hereunder) exceeds $100,000 (the
"INDEMNIFICATION THRESHOLD") in which case the Company will be liable for the
full amount of such Damages including the initial $100,000 of Damages. The
aggregate liability of the Company hereunder will not in any event exceed the
aggregate consideration paid to the Company in connection with this Agreement
and the Warrants(the "INDEMNIFICATION CAP"). Indemnification claims arising from
the registration of Registrable Securities under Federal and state securities
laws are covered by Section 7(b) and not this Section 8.
(ii) INVESTOR INDEMNITY. The Company, its
Affiliates and Associates, and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively, the "COMPANY
INDEMNITEES") shall each be indemnified and held harmless to the extent set
forth in this Section 8, by the Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a proximate result of any
misrepresentation in, or breach of, any representation, warranty, covenant or
agreement made by the Investor in this Agreement; provided, however, no Company
Indemnitee may make a claim for indemnification hereunder unless the aggregate
amount of such Damages (together with all concurrent or prior claims hereunder)
exceeds the Indemnification Threshold, in which case the Investor will be liable
for the full amount of such Damages including the initial $100,000 of Damages.
The aggregate liability of the Investor hereunder will not in any event exceed
the
28
Indemnification Cap. Indemnification claims arising from the registration of
Registrable Securities under Federal and state securities laws are covered by
Section 7(b) and not this Section 8.
(iii) EQUITABLE RELIEF. Nothing set forth in this
Section 8 shall be deemed to prohibit or limit any Investor Indemnitee's or
Company Indemnitee's right at any time before, on or after the Closing, to seek
injunctive or other equitable relief for the failure of any Indemnifying Party
to perform or comply with any covenant or agreement contained herein.
(b) SURVIVAL. All representations and warranties of the
Investor and the Company contained herein and all claims of any Investor
Indemnitee or Company Indemnitee in respect of any inaccuracy or
misrepresentation in or breach hereof, shall survive the Closing until the
second anniversary of the date of this Agreement, regardless of whether the
applicable statute of limitations, including extensions thereof, may expire. All
covenants and agreements of the Investor and the Company contained in this
Agreement shall survive the Closing in perpetuity (except to the extent any such
covenant or agreement shall expire by its terms). All claims of any Investor
Indemnitee or Company Indemnitee in respect of any breach of such covenants or
agreements shall survive the Closing until the expiration of two years following
the non-breaching party's obtaining actual knowledge of such breach.
(c) CLAIMS FOR INDEMNIFICATION. If any Investor
Indemnitee or Company Indemnitee (an "INDEMNITEE") shall believe that such
Indemnitee is entitled to indemnification pursuant to this Section 8 in respect
of any Damages, such Indemnitee shall give the appropriate Indemnifying Party
(which for purposes hereof, in the case of an Investor Indemnitee, means the
Company, and in the case of a Company Indemnitee, means the Investor) prompt
written notice thereof. Any such notice shall set forth in reasonable detail and
to the extent then known the basis for such claim for indemnification. The
failure of such Indemnitee to give notice of any claim for indemnification
promptly shall not adversely affect such Indemnitee's right to indemnity
hereunder except to the extent that such failure adversely affects the right of
the Indemnifying Party to assert any reasonable defense to such claim. Each such
claim for indemnity shall expressly state that the Indemnifying Party shall have
only the twenty (20) business day period referred to in the next sentence to
dispute or deny such claim. The Indemnifying Party shall have twenty (20)
business days following its receipt of such notice either (a) to acquiesce in
such claim by giving such Indemnitee written notice of such acquiescence or (b)
to object to the claim by giving such Indemnitee written notice of the
objection. If the Indemnifying Party does not object thereto within such twenty
(20) business day period, such Indemnitee shall be entitled to be indemnified
for all Damages reasonably and proximately incurred by such Indemnitee in
respect of such claim. If the Indemnifying Party objects to such claim in a
timely manner, the senior management of the Company and the Investor shall meet
to attempt to resolve such dispute. If the dispute cannot be resolved by the
senior management, either party may make a written demand for formal dispute
resolution and specify therein the scope of the dispute. Within thirty (30) days
after such written notification, the parties agree to meet for one (1) day with
an impartial mediator and consider dispute resolution alternatives other than
litigation. If an alternative method of dispute resolution is not agreed upon
within thirty days after the one day mediation, either party may begin
litigation proceedings. Nothing in this section shall be deemed to require
arbitration.
29
(d) DEFENSE OF CLAIMS. In connection with any claim that
may give rise to indemnity under this Section 8 resulting from or arising out of
any claim or Proceeding against an Indemnitee by a person or entity that is not
a party hereto, the Indemnifying Party may (unless such Indemnitee elects not to
seek indemnity hereunder for such claim) but shall not be obligated to, upon
written notice to the relevant Indemnitee, assume the defense of any such claim
or Proceeding if the Indemnifying Party with respect to such claim or Proceeding
acknowledges to the Indemnitee the Indemnitee's right to indemnity pursuant
hereto to the extent provided herein (as such claim may have been modified
through written agreement of the parties) and provides assurances, reasonably
satisfactory to such Indemnitee, that the Indemnifying Party will be financially
able to satisfy such claim to the extent provided herein if such claim or
Proceeding is decided adversely; PROVIDED, HOWEVER, that nothing set forth
herein shall be deemed to require the Indemnifying Party to waive any
crossclaims or counterclaims the Indemnifying Party may have against the
Indemnified Party for damages. The Indemnified Party shall be entitled to retain
separate counsel, reasonably acceptable to the Indemnifying Party, if the
Indemnified Party shall determine, upon the written advice of counsel, that an
actual or potential conflict of interest exists between the Indemnifying Party
and the Indemnified Party in connection with such Proceeding. The Indemnifying
Party shall be obligated to pay the reasonable fees and expenses of such
separate counsel to the extent the Indemnified Party is entitled to
indemnification by the Indemnifying Party with respect to such claim or
Proceeding under this Section 8(d). If the Indemnifying Party assumes the
defense of any such claim or Proceeding, the Indemnifying Party shall select
counsel reasonably acceptable to such Indemnitee to conduct the defense of such
claim or Proceeding, shall take all steps necessary in the defense or settlement
thereof and shall at all times diligently and promptly pursue the resolution
thereof. If the Indemnifying Party shall have assumed the defense of any claim
or Proceeding in accordance with this Section 8(d), the Indemnifying Party shall
be authorized to consent to a settlement of, or the entry of any judgment
arising from, any such claim or Proceeding, with the prior written consent of
such Indemnitee, not to be unreasonably withheld; PROVIDED, HOWEVER, that the
Indemnifying Party shall pay or cause to be paid all amounts arising out of such
settlement or judgment concurrently with the effectiveness thereof; PROVIDED
FURTHER, that the Indemnifying party shall not be authorized to encumber any of
the assets of any Indemnitee or to agree to any restriction that would apply to
any Indemnitee or to its conduct of business; and PROVIDED FURTHER, that a
condition to any such settlement shall be a complete release of such Indemnitee
and its Affiliates, directors, officers, employees and agents with respect to
such claim, including any reasonably foreseeable collateral consequences
thereof. Such Indemnitee shall be entitled to participate in (but not control)
the defense of any such action, with its own counsel and at its own expense.
Each Indemnitee shall, and shall cause each of its Affiliates, directors,
officers, employees and agents to, cooperate fully with the Indemnifying Party
in the defense of any claim or Proceeding being defended by the Indemnifying
Party pursuant to this Section 8(d). If the Indemnifying Party does not assume
the defense of any claim or Proceeding resulting therefrom in accordance with
the terms of this Section 8(d), such Indemnitee may defend against such claim or
Proceeding in such manner as it may deem appropriate, including settling such
claim or Proceeding after giving notice of the same to the Indemnifying Party,
on such terms as such Indemnitee may deem appropriate. If any Indemnifying Party
seeks to question the manner in which such Indemnitee defended such claim or
Proceeding or the amount of or nature of any such settlement, such Indemnifying
Party shall have the burden to prove by a preponderance of
30
the evidence that such Indemnitee did not defend such claim or Proceeding in
a reasonably prudent manner.
(e) NO OTHER CLAIMS. The indemnification obligations set
forth in this Section 8 shall be the exclusive remedy of the Investor and the
Company for claims against each other in connection with this Agreement, whether
such claims are in tort or contract or whether such claims are made for breach
of any representation, warranty or covenant herein or otherwise; provided, that
this Section 8(e) shall not limit the ability of either party hereto (i) to make
a claim other than in connection with this Agreement based on events occurring
or actions taken by the other party after the date hereof (including, without
limitation, claims in connection with the Business Agreement) or (ii) to recover
damages for fraud.
(f) CERTAIN DEFINITIONS. As used in this Agreement, (a)
"AFFILIATE" means, with respect to any person or entity, any person or entity
directly or indirectly controlling, controlled by or under direct or indirect
common control with such other person or entity; (b) "ASSOCIATE" means, when
used to indicate a relationship with any person or entity, (1) any other person
or entity of which such first person or entity is an officer, director or
partner or is, directly or indirectly, the beneficial owner of ten percent (10%)
or more of any class of equity securities, membership interests or other
comparable ownership interests issued by such other person or entity, (2) any
trust or other estate in which such first person or entity has a ten percent
(10%) or more beneficial interest or as to which such first person or entity
serves as trustee or in a similar fiduciary capacity, and (3) any relative or
spouse of such first person or entity who has the same home as such first person
or entity or who is a director or officer of such first person or entity; (c)
"DAMAGES" means all demands, claims, actions or causes of action, assessments,
losses, damages, costs, expenses, liabilities, judgments, awards, fines,
response costs, sanctions, taxes, penalties, charges and amounts paid in
settlement, including (1) interest on cash disbursements in respect of any of
the foregoing at the prime rate of Chase Manhattan Bank, as in effect from time
to time, compounded quarterly, from the date each such cash disbursement is made
until the date the party incurring such cash disbursement shall have been
indemnified in respect thereof, and (2) reasonable out-of-pocket costs, fees and
expenses (including reasonable costs, fees and expenses of attorneys,
accountants and other agents of, or other parties retained by, such party), and
(d) "PROCEEDING" means any action, suit, hearing, arbitration, audit, proceeding
(public or private) or investigation that is brought or initiated by or against
any federal, state, local or foreign governmental authority or any other person
or entity.
9. ASSIGNMENT. The rights of the Investor under Sections 7(a)
and (b) are transferable to a Person who acquires any of the Purchased Shares.
The rights of the Investor under Sections 7(d) and (e) are transferable only
to a Subsidiary or any Person who acquires all of the Purchased Shares and
the Warrants or Warrant Shares in circumstances where the Investor is
transferring such securities to such Person to comply with applicable law or
a request of a governmental authority (including in connection with any
approvals the Investor may be seeking from such governmental authority
relating to any acquisition, license or other business activity engaged in,
or proposed to be engaged in, by the Investor). No assignment permitted by
this Section 9 shall be effective until the Company is given written notice
by the assigning party stating the name and address of the assignee and
identifying the securities of the Company as to which the rights in question
are being assigned. In all cases, any such assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement.
31
10. STANDSTILL AGREEMENT.
10.1 STANDSTILL. The Investor hereby agrees that the Investor shall
neither acquire, nor enter into discussions, negotiations, arrangements or
understandings with any third party to acquire, beneficial ownership (as defined
in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended)
of any Voting Stock (as defined below), any securities convertible into or
exchangeable for Voting Stock, or any other right to acquire Voting Stock
(except, in any case, by way of stock dividends or other distributions or
offerings made available to holders of any Voting Stock generally) without the
written consent of the Company, if the effect of such acquisition would be to
increase the Voting Power (as defined below) of all Voting Stock then
beneficially owned (as defined above) by the Investor or which it has a right to
acquire to more than nineteen and ninety-nine one hundredths percent (19.99%)
(the "STANDSTILL PERCENTAGE") of the Total Voting Power (as defined below) of
the Company at the time in effect; PROVIDED that:
(a) The Investor may acquire Voting Stock without regard to
the foregoing limitation, and such limitation shall be suspended, but not
terminated, if and for as long as (i) a tender or exchange offer is made and is
not withdrawn or terminated by another person or group to purchase or exchange
for cash or other consideration any Voting Stock that, if accepted or if
otherwise successful, would result in such person or group beneficially owning
or having the right to acquire shares of Voting Stock with aggregate Voting
Power of more than nineteen and ninety-nine one hundredths percent (19.99%) of
the Total Voting Power of the Company then in effect and such offer is not
withdrawn or terminated prior to the Investor making an offer to acquire Voting
Stock or acquiring Voting Stock; PROVIDED HOWEVER, that the foregoing standstill
limitation will be reinstated once any such tender or exchange offer is
withdrawn or terminated, (ii) another person or group hereafter acquires Voting
Stock that results in such person or group being required to file a Schedule 13D
(under the rules promulgated under Section 13(d) under the Securities and
Exchange Act of 1934, as such rules and section are in effect on the date
hereof), or other similar or successor schedule or form, indicating that the
purpose of such acquisition is other than for mere investment; PROVIDED,
HOWEVER, that the foregoing standstill limitation will be reinstated once the
percentage of Total Voting Power beneficially owned by such other person or
group falls below five percent (5%); (iii) another person or group hereafter
acquires Voting Stock that results in such person or group being required to
file a Schedule 13G, or other similar or successor schedule or form, indicating
that such other person or group beneficially owns or has the right to acquire
Voting Stock with aggregate Voting Power of more than nineteen and ninety-nine
one hundredths percent (19.99%) of the Total Voting Power of the Company;
PROVIDED, HOWEVER, that the foregoing standstill limitation will be reinstated
once the percentage of Total Voting Power beneficially owned by such other
person or group falls below five percent (5%); or (iv) another person or group
orally or in writing contacts the Company and advises the Company of such
person's or group's intention to commence a tender or exchange offer that, if so
commenced, would result in a suspension pursuant to clause (i) above (e.g., a
"bear hug" offer); PROVIDED, HOWEVER, that the foregoing standstill limitation
will be reinstated if such intention is withdrawn in writing or other reasonable
evidence of such withdrawal is provided to the Investor. The Company shall
notify the Investor in writing of the occurrence of any event described in
clauses (i) through (iv) of the immediately preceding sentence as soon as
practicable following the Company's becoming aware of any such event, and in any
case, shall
32
provide the Investor written notice of any such event within twenty-four (24)
hours of the occurrence of any such event.
(b) The Investor will not be obliged to dispose of any Voting
Stock if the aggregate percentage of the Total Voting Power of the Company
represented by Voting Stock beneficially owned by the Investor or which the
Investor has a right to acquire is increased beyond the Standstill Percentage
(i) as a result of a recapitalization of the Company or a repurchase or exchange
of securities by the Company or any other action taken by the Company or its
affiliates; (ii) as the result of acquisitions of Voting Stock made during the
period when the Investor's "standstill" obligations are suspended pursuant to
Section 10.1(a); (iii) as a result of an equity index transaction, provided that
Investor shall not vote such shares; (iv) by way of stock dividends or other
distributions or rights or offerings made available to holders of shares of
Voting Stock generally; (v) with the consent of a simple majority of the
authorized members of the Company's Board of Directors; or (vi) as part of a
transaction on behalf of Investor's Defined Benefit Pension Plan, Profit Sharing
Retirement Plan, 401(k) Savings Plan, Sheltered Employee Retirement Plan and
Sheltered Employee Retirement Plan Plus, or any successor or additional
retirement plans thereto (collectively, the "RETIREMENT PLANS") where the
Company's shares in such Retirement Plans are voted by a trustee for the benefit
of Investor employees or, for those Retirement Plans where Investor controls
voting, where Investor agrees not to vote any shares of such Retirement Plan
Voting Stock that would cause Investor to exceed the Standstill Percentage.
(c) As used in this Section 10, (i) the term "VOTING STOCK"
means the Common Stock and any other securities issued by the Company having the
ordinary power to vote in the election of directors of the Company (other than
securities having such power only upon the happening of a contingency that has
not occurred), (ii) the term "VOTING POWER" of any Voting Stock means the number
of votes such Voting Stock is entitled to cast for directors of the Company at
any meeting of shareholders of the Company, and (iii) the term "TOTAL VOTING
POWER" means the total number of votes which may be cast in the election of
directors of the Company at any meeting of shareholders of the Company if all
Voting Stock was represented and voted to the fullest extent possible at such
meeting other than votes that may be cast only upon the happening of a
contingency that has not occurred. For purposes of this Section 10, the Investor
shall not be deemed to have beneficial ownership of any Voting Stock held by a
pension plan or other employee benefit program of the Investor if the Investor
does not have the power to control the investment decisions of such plan or
program.
10.2 RIGHT OF FIRST REFUSAL UPON SECTION 10.1(a) EVENT. If the Investor
elects to participate and tender or exchange any of the Shares pursuant to any
event described in clause (i) of the first sentence of Section 10.1(a), the
Investor shall provide written notice of such intention to the Company. The
Company shall have two (2) business days from delivery of such notice to elect
to purchase all, but not less than all, of such Shares from the Investor for
cash, at the Offer Price (as defined below) per share offered by the person or
group in the event described in clause (i), by delivering an irrevocable written
election by the Company to purchase such Shares at such price. In the event the
Company delivers such written election, the Company shall be obligated to
purchase, and the Investor shall be obligated to sell, such Shares within five
(5) business days of delivery of the Company's written election to the Investor.
If the Company fails to deliver such written election within the two (2)
business day period described above or fails to purchase
33
such Shares within the five (5) business day period described above, it shall
forfeit its rights under this Section 10.2 with respect to such tender or
exchange, regardless whether the terms and conditions of such tender or
exchange may subsequently be modified. As used herein, "Offer Price" means
(a) in the case of a cash offer, the amount of cash per share to be paid; (b)
in the case of a share offer where the shares offered are listed on an
exchange or quoted on the Nasdaq National Market, an amount equal to the
average of the closing prices of such security's sales on all domestic
securities exchanges on which said security may at the time be listed, or, if
there have been no sales on any such exchange on such day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ National Market as
of 4:00 p.m., New York time, or, if on any day such security is not quoted in
the NASDAQ National Market, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor
organization, all determined as of the date written notice is delivered to
the Company by the Investor pursuant to the first sentence of this Section
10.2; or (c) in the event of any other tender or exchange offer, the value of
the securities and/or other property as set forth in the offer by the person
or group making such offer.
10.3 TERMINATION OF STANDSTILL. The provisions of Sections 10.1
and 10.2 shall terminate on the second anniversary of the date of this
Agreement.
11. TERMINATION. Prior to the Closing, this Agreement
may be terminated and the purchase and sale of the Purchased Shares and the
Warrants contemplated by this Agreement may be abandoned only in accordance
with the following provisions:
(a) by mutual written consent of the Investor and the
Company;
(b) by the Investor or the Company if any court of
competent jurisdiction in the United States or other United States federal or
state governmental authority shall have issued a final order, decree or ruling,
or taken any other final action, restraining, enjoining or otherwise prohibiting
the purchase and sale of the Purchased Shares, and such order, decree, ruling or
other action is or shall have become nonappealable;
(c) by the Investor, upon five (5) days written notice to
the Company, if the Closing shall not have occurred by December 23, 1999 (the
"OUTSIDE DATE"); PROVIDED, HOWEVER, that the Investor may not terminate this
Agreement pursuant to this clause (c) if the Investor's failure to fulfill any
of its obligations under this Agreement shall have been a principal reason that
the Closing shall not have occurred on or before said date;
(d) by the Company if (i) there shall have been a breach
of any representation or warranty on the part of the Investor set forth in this
Agreement or if any representation or warranty of the Investor shall have become
untrue such that the conditions set forth in Section 6(a) would be incapable of
being satisfied by the Outside Date; PROVIDED, HOWEVER, that the Company shall
only be able to terminate this Agreement under this Section 11(d)(i) if it has
not breached any of its obligations hereunder in any material respect; or (ii)
there shall have been a breach by the Investor of any of its respective
covenants or agreements hereunder in any material respect, and the Investor has
not cured such breach within ten (10) business days after
34
notice by the Company thereof; PROVIDED, HOWEVER, that the Company shall only
be able to terminate this Agreement under this Section 11(d)(ii) if it has
not breached any of its obligations hereunder in any material respect; or
(e) by the Investor if (i) there shall have been a breach
of any representation or warranty on the part of the Company set forth in this
Agreement or if any representation or warranty of the Investor shall have become
untrue such that the conditions set forth in Section 5(a) would be incapable of
being satisfied by the Outside Date; PROVIDED, HOWEVER, that the Investor shall
only be able to terminate this Agreement under this Section 11(e)(i) if it has
not breached any of its obligations hereunder in any material respect; or (ii)
there shall have been a breach by the Company of any of its respective covenants
or agreements hereunder in any material respect, and the Company has not cured
such breach within ten (10) business days after notice by the Investor thereof;
PROVIDED, HOWEVER, that the Investor shall only be able to terminate this
Agreement under this Section 11(e)(ii) if it has not breached any of its
obligations hereunder in any material respect.
In the event of the termination of this Agreement, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders;
PROVIDED, HOWEVER, nothing contained herein shall relieve any party from
liability for any breach of this Agreement prior to such termination.
12. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement will inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties.
(b) GOVERNING LAW. This Agreement will be governed by and
construed under the internal laws of the State of Delaware, without reference to
principles of conflict of laws or choice of laws.
(c) COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(d) HEADINGS. The headings and captions used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. All references in this Agreement to
sections, paragraphs, exhibits and schedules will, unless otherwise provided,
refer to sections and paragraphs hereof and exhibits and schedules attached
hereto, all of which exhibits and schedules are incorporated herein by this
reference.
(e) NOTICES. Any notice required or permitted under this
Agreement shall be given in writing, shall be effective when received, and shall
in any event be deemed received and effectively given upon personal delivery to
the party to be notified or three (3) business days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid, or
one (1) business day after deposit with a nationally recognized courier service
such as FedEx for next business day delivery under circumstances in which such
service guarantees next business day delivery, or one (1) business day after
facsimile with copy delivered by registered
35
or certified mail, in any case, postage prepaid and addressed to the party to
be notified at the address indicated for such party on the signature page
hereof or at such other address as the Investor or the Company may designate
by giving at least ten (10) days advance written notice pursuant to this
Section 12(e).
(f) NO FINDER'S FEES. The Investor will indemnify and
hold harmless the Company from any liability for any commission or compensation
in the nature of a finders' or broker's fee for which the Investor or any of its
officers, partners, employees or consultants, or representatives is responsible.
The Company will indemnify and hold harmless the Investor from any liability for
any commission or compensation in the nature of a finder's or broker's fee for
which the Company or any of its officers, employees or consultants or
representatives is responsible.
(g) AMENDMENTS AND WAIVERS. The provisions of this
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company, the Investor (so
long as the Investor shall hold any of the Purchased Shares) and the holders of
Purchased Shares representing at least a majority of the total aggregate number
of Purchased Shares then outstanding (excluding any of such shares that have
been sold in a transaction in which rights under Section 7(b) are not assigned
in accordance with this Agreement or sold to the public pursuant to SEC Rule 144
or otherwise). Any amendment or waiver effected in accordance with this Section
12(g) will be binding upon the Investor, the Company and their respective
successors and assigns.
(h) SEVERABILITY. If any provision of this Agreement is
held to be unenforceable under applicable law, such provision will be excluded
from this Agreement and the balance of the Agreement will be interpreted as if
such provision were so excluded and will be enforceable in accordance with its
terms.
(i) ENTIRE AGREEMENT. This Agreement, together with all
exhibits and schedules hereto, constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements.
understandings duties or obligations between the parties with respect to the
subject matter hereof.
(j) FURTHER ASSURANCES. From and after the date of this
Agreement upon the request of the Company or the Investor, the Company and the
Investor will execute and deliver such instruments, documents or other writings,
and take such other actions, as may be reasonably necessary or desirable to
confirm and carry out and to effectuate fully the intent and purposes of this
Agreement.
(k) MEANING OF INCLUDE AND INCLUDING. Whenever in this
Agreement the word "include" or "including" is used, it shall be deemed to mean
"include, without limitation" or "including, without limitation," as the case
may be, and the language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
36
(l) FEES, COSTS AND EXPENSES. All fees, costs and
expenses (including attorney's' fees and expenses) incurred by either part
hereto in connection with the preparation, negotiation and execution of this
Agreement and the consummation of the transactions contemplated hereby and
thereby (including the costs associated with any filings with, or compliance
with any of the requirements of, any governmental authorities), shall be the
sole and exclusive responsibility of such party. Notwithstanding the above, the
Company shall pay to Investor, concurrently with the Closing, $20,000
representing an agreed amount to cover Investor's internal and external costs in
connection with the transactions contemplated by this Agreement.
(m) COMPETITION. Nothing set forth herein shall be deemed
to preclude, limit or restrict the Company's or the Investor's ability to
compete with the other.
(n) COOPERATION IN HSR ACT FILINGS.
(i) In the event of the exercise of the Warrants
(or any other action by the Investor with respect to any securities of the
Company held by the Investor) that would require a filing by the Investor under
the HSR Act, the Investor and its respective Affiliates (including any "ultimate
parent entity", as defined in the HSR Act), and the Company and its respective
Affiliates (including any "ultimate parent entity", as defined in the HSR Act),
shall promptly prepare and make their respective filings and thereafter shall
make all required or requested submissions under the HSR Act or any analogous
applicable law, if required. In taking such actions or making any such filings,
the parties hereto shall furnish information required in connection therewith
and seek timely to obtain any applicable actions, consents, approvals or waivers
of governmental authorities; PROVIDED, HOWEVER, that the parties hereto shall
cooperate with each other in connection with the making of all such filings to
the extent permitted by applicable law. Without limiting the generality of the
foregoing, to the extent permitted by applicable law and so long as the
following will not involve the disclosure of confidential or proprietary
information of one party hereto to another, each party shall cooperate with the
other by (a) providing copies of all documents to be filed to the non-filing
party and its advisors prior to filing and, if requested, accepting reasonable
additions, deletions or changes suggested in connection therewith and (b)
providing to each other party copies of all correspondence from and to any
governmental authority in connection with any such filing.
(ii) Notwithstanding the foregoing, neither the
Investor nor the Company or any of their respective Affiliates shall be under
any obligation to comply with any request or requirement imposed by the Federal
Trade Commission (the "FTC"), the Department of Justice (the "DOFJ") or any
other governmental authority in connection with the compliance with the
requirements of the HSR Act, or any other applicable law, if the Investor or the
Company, as applicable, in the exercise of its reasonable discretion, deems such
request or requirement unduly burdensome. Without limiting the generality of the
foregoing, neither party shall not be obligated to comply with any request by,
or any requirement of, the FTC, the DofJ or any other governmental authority:
(i) to disclose information such party deems it in its best interests to keep
confidential; (ii) to dispose of any assets or operations; or (iii) to comply
with any proposed restriction on the manner in which it conducts its operations.
In the event such party shall receive a second request in respect of its HSR
Filing determined by it to be unduly burdensome and it shall prove unable to
negotiate a means satisfactory to such party for
37
complying with such burdensome second request, or the Federal Trade
Commission or Department of Justice shall impose any condition on such party
or its Affiliates in respect thereof deemed unacceptable by such party, then
the Company and the Investor shall in good faith enter into negotiations
regarding an alternative transaction that provides the Investor with the
economic benefits it would receive if it exercised the Warrants or the
warrant issued in connection with the Business Agreement.
(o) RIGHTS PLAN. Without limiting the generality of
Section 12(j), in the event that the Investor desires to take any action
permitted by this Agreement or the Warrants, and such action would trigger or
activate any provision under any existing or future shareholder rights plan of
the Company (including any successor plan or other plan or mechanism adopted by
the Company that has the effect or purpose of discouraging an acquisition of all
or any portion of the Company, whether by means of a merger, tender offer,
acquisition of assets or stock, or otherwise, a "RIGHTS PLAN"), or would trigger
or activate any provision of any state or other antitakeover statute, the
Company shall take all actions necessary (including action by its Board of
Directors) to permit the Investor to take such permitted action without causing
any such trigger or activation.
(j) STOCK SPLITS, DIVIDENDS AND OTHER SIMILAR EVENTS. The
provisions of this Agreement (including the number of shares of Common Stock and
other securities described herein) shall be appropriately adjusted to reflect
any stock split, stock dividend, reorganization or other similar event that may
occur with respect to the Company after the date hereof.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
38
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
PANJA INC. INTEL CORPORATION
By: /s/ Xxx Xxxxx By: /s/ Xxxxxx Xxxxxxx
------------------------------- ----------------------------------
Name: Xxx Xxxxx Name: Xxxxxx Xxxxxxx
----------------------------- ----------------------------------
Title: President and Chief Executive Officer Title: Vice President and Treasurer
---------------------------- ----------------------------------
Date Signed: December 15, 1999 Date Signed: December 14, 1999
---------------------- ----------------------------
Address: 00000 Xxxxxxxxxxx Xxxxx Address: 0000 Xxxxxxx Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxx 00000 Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxx Xxxxx Attn: M&A Portfolio Manager
- M/S RN6-46
Telephone No: (000) 000-0000
Facsimile No: (000) 000-0000 Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with copies to: with copies to:
Intel Corporation
Munsch, Hardt, Xxxx & Xxxx, P.C. 0000 Xxxxxxx Xxxxxxx Xxxxxxxxx
Attention: A. Xxxxxxx Xxxxxxxxxxxx Xxxxx Xxxxx, Xxxxxxxxxx 00000
0000 Xxxxxxxx Xxxxx Attention: General Counsel
0000 Xxxx Xxxxxx Fax Number: (000) 000-0000
Xxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000 and
Facsimile No.: (000) 000-0000
Xxxxxx, Xxxx & Xxxxxxxx LLP
Attention: Xxxxxxxx Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
{Signature page to Securities Purchase and Investor Rights Agreement}
39
EXHIBIT A
EXHIBIT B
EXHIBIT C
Matters to be covered by opinion of counsel, subject to customary limitations
and qualifications.
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Texas. The Company has all
requisite corporate power and authority to own or lease its properties and
assets and to conduct its business as it currently conducted.
2. The Company has all requisite corporate power and authority to
execute and deliver the Securities Purchase Agreement and the Warrants, to sell
and issue the Purchased Shares and the Warrants, to the Investor and to
otherwise carry out and perform its obligations under the terms of the
Securities Purchase Agreement and the Warrants. The Securities Purchase
Agreement and the Warrants have been duly and validly authorized, executed and
delivered by the Company, and each constitutes a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms.
3. Based in part on the representations and warranties of Investor in
the Securities Purchase Agreement, the offer and sale of the Purchased Shares
and the Warrants are exempt from the registration provisions of the Securities
Act of 1933, as amended.
4. All corporate actions necessary on the part of the Company for the
sale and the issuance of the Purchased Shares and the Warrants to the Investor
and the execution and delivery of the Purchase Agreement and the Warrants and
the performance of the Company's obligations thereunder have been taken. The
Purchased Shares and the Warrant Shares, when issued and paid for as provided in
the Purchase Agreement and the Warrants, will be validly issues, fully paid and
nonassessable.
5. The Company is not in violation of any term of its Articles of
Incorporation or Bylaws. To such counsel's knowledge, neither the execution,
delivery and performance of the Purchase Agreement nor the issuance of the
Purchased Shares and the Warrants will result in any such violation or
constitute a default under or breach of (i) the provision of any judgment, writ,
decree or order applicable to, or binding upon, the Company or (ii) any law,
rule or regulation applicable to the Company.
6. Except for the listing of the Purchased Shares and the Warrant
Shares on Nasdaq and post-closing filings with the SEC (or any actions to be
taken under Section 7(b) of the Securities Purchase Agreement or to be taken
under the HSR Act), no consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority on the part of the
Company is required for the execution and delivery of the Securities Purchase
Agreement and the Warrants and the sale and issuance of the Purchased Shares and
the Warrants.
